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Purpose

Fintech Risk Events is an open catalog of observed (publicized) operational failures of fintech business models. The catalog aims to document (in due course) such events reasonably accurately to allow risk managers understand the (potentially new) vulnerabilities of new financial services models.

Criteria for inclusion

Company Scope

Fintech companies, i.e. newly established financial services providers that operate primarily or exclusively via new (digital) platforms and may be unregulated, as distinct from established financial services firms that operate with a mix of older technology platforms and are (mostly) regulated. Indicatively, the crisis period of 2008-2009 is the cutoff date for newly established entities.

As established firms adopt "fintech" models the list will aim to include any operational risk events associated with these platforms (to the extend that this can be clearly identified in published information). Out of scope are risk events captured under other risk categories such as unexpected credit losses (credit risk) or market losses (market risk), although sometimes it is difficult to cleanly classify an event.

General purpose digital marketplaces (e-commerce) are not in scope.

Risk Event Eligibility

There should be adequate, independent, confirmed and public information about the event, with authoritative, permanent urls.

Materiality Threshold

At present there is no explicit materiality threshold except for bitcoin incidents where a 1mln (rough) equivalent threshold is used.

Risk Event Classification

Basel Operational Risk Categories

Given the close relation of Fintech to the financial industry it is instructive to attempt to classify events according to the globally recognized bank regulatory framework (Basel II) as listed below:

This classification may be tenuous for some instances, given the novelty of business models.

Business Failure Events

The Basel classification scheme does not include total business failure (that is, events of administration, bankruptcy etc) as an operational risk event. This is because the operational risk framework is primarily meant to help manage / mitigate operational risks, whereas bankruptcy is clearly the final outcome when all management efforts have failed. We currently do include fintech business failures as a category, as they are informative for risk management purposes. A threshold of total funding raised will be applied (to differentiate bankruptcies from the much more common business model failures of early stage startups). On the other hand, failure of a new business model to flourish (resulting e.g. in an orderly sale to third party), while possibly informative about risk factors associated with the adopted business model, can not be cleanly separated from more traditional risk management categories and will no be included.

Crowdfunding

There are various reports (and reporting sites) about crowdfunding scams. While the proliferation of such events can potentially tarnish the reputation of crowdfunding platforms, to date there appears to be no event that would qualify

Further bitcoin related events

A larger list of bitcoin incidents was maintained in the List of Bitcoin Heists (apparently no longer updated)